Omega Polymer files for Ch. 11, shops its units

Plastics company cites rising resin prices, client bankruptcies as cause of troubles
Aurora plastics company Omega Polymer Technologies Inc. has filed for Chapter 11 bankruptcy protection from creditors and, after already selling one division, is weighing the sale of its two remaining units.
In its Aug. 21 filing with the U.S. Bankruptcy Court in Erie, Pa., Omega blamed its downfall largely on hikes in resin prices, which have climbed with the rise in oil and natural gas prices. To keep its largest customers, the filing stated, Omega was 'forced' to give discounts, which cost the company an estimated $1.8 million between January 2004 and June 2006.
Omega's bankruptcy filing also comes partly as a result of the Chapter 11 filings of two of its big customers, automotive supplier Delphi Corp. and Transmatic Inc., a Michigan-based maker of dust control equipment, interior panels and other products.
The problems at Delphi and Transmatic initiated a 'significant' loss of more than $500,000 in uncollectible accounts receivable, as well as a loss on custom inventory, the filing stated. The resulting slowdown from the drop in business caused an undisclosed amount of work force 'attrition' at Omega, the filing shows.
Omega disclosed in the filing that it had liabilities of $23.6 million and assets of between $10 million and $50 million, though a specific number was not revealed. Its revenues for 2005 were listed at $46.9 million.
According to the filing, Omega is not able to 'service its existing debt structure or make the capital investments necessary to continue in business.' The company therefore is shopping its assets, according to Guy Fustine, lead bankruptcy attorney for Omega.
The first sale occurred Aug. 3, when the company sold 'most' of the assets of its Viking Plastics Inc. injection molding division in Corry, Pa., for $4.6 million, Mr. Fustine said during an Aug. 23 bankruptcy hearing in Erie.
Viking Plastics made products used in the automotive and heating, ventilation and air conditioning businesses. The buyer was Kelly Goodsel, Viking Plastics' top executive, according to a report in Plastics News, a sister publication of Crain's Cleveland Business.

Abundance of lookers
Court documents indicate Omega has found itself to be an attractive acquisition target. More than 100 potential purchasers, including private equity funds, strategic buyers and funds with a niche in buying distressed companies, have showed interest in acquiring Omega during the past few months, the company states.
Mr. Fustine said talks are ongoing with other suitors interested in Omega's two remaining divisions:Omega Pultrusions Inc., which makes products including window and door frames and lighting fixtures, and Carsonite International Corp., which supplies safety equipment for the highway and recreation markets.
'We are working hard to maintain the company as a going concern from an operational standpoint and, simultaneous with that, we are having discussions with interested purchasers,' Mr. Fustine said in the interview. 'But we are doing our best to act quickly to either reorganize or sell before the business deteriorates.'
He referred further questions to company executives and the Bankruptcy Court filings. Court records show Omega had been trying to sell the company as recently as April of this year. Omega has until Dec. 19 to file its plan of reorganization.
Two messages to Omega's headquarters were not returned last week.
A steady decline
Omega employs 135 in Aurora, Mr. Fustine said during the Aug. 23 hearing, and 225 companywide. In addition to Ohio operations, Omega runs two plants in South Carolina.
Some job cuts have taken place at the company, though Bankruptcy Court documents did not specify how many positions have been eliminated. An August 2005 job posting on Omega's web site, though, put the company's Aurora employment at the time at 150 workers, 15 employees more than what Mr. Fustine stated during the hearing. Also, a company news release from March 2005 indicated Omega employed 330 in Ohio, Pennsylvania and South Carolina.
One employee who no longer is with Omega is Stanley M. Burson, who served as president and CEO of the company from July 2001 to his resignation in March 2005. Mr. Burson was hired to help 'reposition the company for growth' according to a March 2005 news release announcing his resignation. Replacing Mr. Burson was a triumvirate of executives:Ronald Baker, executive vice president and chief financial officer; David Morley, president of sales; and Donald Smith, president of operations.

'With the successful completion of the turnaround, Burson has decided to pursue other opportunities,' the news release stated. A listed phone number for Mr. Burson could not be located.
Just how successful that turnaround was is open to question.
Omega 'was never a strong company to begin with,' and part of the reason for its decline could be because of its Omega Pultrusion division, said Jeff Mengle, who follows the plastics industry for accounting firm Plante & Moran PLLC. In pultrusion, companies put glass fiber into rod form to make such things as broom handles.
The division employs an older technology, he said, and markets for pultruded products have been losing ground to newer processes.
The power of pricing
Joe Bergen, president and CEO of custom injection molder Sajar Plastics Inc. in Middlefield, said the pricing pressure that helped lead to Omega's problems is one of the biggest challenges facing plastics companies these days. Prices of the resins used to make plastic products have been lifted by hikes in oil and natural gas prices, which has made it tough for manufacturers to maintain their profit margins.
'I think everybody's fighting this whole raw material issue,' he said.
To compensate for the rising prices, Sajar has worked with customers on alternative solutions, such as substituting different materials, rather than reverting to a 'bloody-your-forehead' method of forcing the increases along, Mr. Bergen said.